United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS February 13, 2004
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
_______________________
NO. 02-20017
_______________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ALICE MILES, RICHARD MILES and CARRIE HAMILTON,
Defendants-Appellants.
_________________________________________________________________
Appeals from the United States District Court
for the Southern District of Texas
________________________________________________________________
Before GARWOOD, JONES, and STEWART, Circuit Judges.
EDITH H. JONES, Circuit Judge:
In October 1999, a federal grand jury in the Southern
District of Texas filed a 32-count indictment charging Carrie
Hamilton, Richard Miles, Alice Miles, and Harold Miles with
multiple crimes related to fraud on the Medicare program. A jury
acquitted Harold Miles, convicted Richard Miles of two mail fraud
counts, and convicted Alice Miles and Carrie Hamilton of 28 and 29
counts, respectively.1 The three remaining defendants appeal on a
variety of grounds, the most significant of which challenge their
convictions for money laundering promotion and illegal Medicare
kickbacks. We reverse the money laundering promotion and kickback
counts. We also reverse the court’s sentencing finding that
Medicare is a “financial institution” within the meaning of
U.S.S.G. 2B1.1(b)(12)(A). We otherwise affirm the convictions and
remand for resentencing.
I. BACKGROUND
Affiliated Professional Home Health (“APRO”) was formed
in 1993 in Houston, Texas by Carrie Hamilton, Alice Miles, and
Richard Miles. Richard Miles, a vice-principal of a Houston-area
high school, was married to Alice Miles, a registered nurse, and is
the brother of both Hamilton, also a registered nurse, and Harold
Miles, an APRO employee. When APRO obtained certification from the
Texas Department of Health and a Medicare provider number, the
company began to treat Medicare-covered patients and obtain
reimbursement for in-home visits to such patients.
Medicare requires home health care providers to report
their expenses and number of patient visits. In turn, Medicare
1
Richard Miles was sentenced to 97 months imprisonment, three years
of supervised release, 300 hours of community service, and a $200 special
assessment. Alice Miles was sentenced to 168 months imprisonment, three years
of supervised release, and a $2,100 special assessment. Carrie Hamilton was
sentenced to 204 months imprisonment, three years of supervised release, and a
$2,100 special assessment. In addition, all three defendants were jointly and
severally ordered to make restitution to the federal government in the amount of
$4,292,246.72.
2
calculates a “per-visit” rate which it then uses to reimburse the
home health provider over the next year. At the end of each year,
providers are required to submit their actual expenses to Medicare
so that it can determine whether it has under- or overpaid the
provider for that year. The expenses reported by providers to
Medicare include the direct costs of patient care, including
salaries and employee benefits as well as general operating
expenses such as office rent and equipment. Indirect costs may be
expensed to Medicare on a pro-rata basis according to the
proportion of Medicare patients served by the provider. Medicare
also reimburses a wide variety of additional expenses incurred by
home health care providers such as mileage incurred in travel to
and from patient residences. The touchstone for reimbursement is
that costs must be reasonable, related to patient care, and
necessary for the provider’s business functions. See 42 U.S.C.
§ 1395f(b); 42 U.S.C. § 1995x(v).
In an effort to promote efficiency despite the cost-plus
nature of reimbursement, Medicare contracts with intermediary
agencies to audit providers’ cost reports. Further, because the
Medicare reimbursement system offers the not-so-wily criminal
numerous avenues to defraud the federal government, intermediary
agencies closely monitor provider reports for fraudulent activity.
APRO’s relationship with Medicare was conducted through Palmetto
Government Benefits Association (“Palmetto”), a subsidiary of South
Carolina Blue Cross/Blue Shield.
3
In this case, the Government presented evidence that the
defendants, through APRO, submitted cost reports that grossly
inflated expenses for items ranging from mileage to employee
salaries. For example, Hamilton was reimbursed for a whopping
282,000 travel miles from 1994-1996, a period when she also
frequently visited Louisiana casinos. Alice Miles, another avid
gambler, was reimbursed for 150,000 travel miles over three years,
while her husband, whose primary job kept him occupied for most of
the work day, was reimbursed for 180,000 miles over four years.
APRO also obtained reimbursement for costs that included
personal expenses such as renovations to the Hamiltons’ home,
renovations to the Miles’ parents’ residence, and various home
appliances. Eventually, the amount of money coming in to APRO for
fake charges became so large that in order to sustain the claimed
level of expenses over the next year — so that APRO would not have
to return overpayments to the federal government — the APRO
principals began to use a variety of other methods to bilk Medicare
out of taxpayer funds. These methods included their writing large-
dollar checks to employees for “expenses” or “back pay” and then
requiring the employees to cash the checks and hand the funds back
to the APRO principals. Appellants billed expenses to Medicare for
two or three times the actual cost incurred. At times, they
engaged in more intricate schemes involving the splitting of large
reimbursement checks into smaller cashier’s checks which were then
deposited into the APRO principals’ bank accounts or used for
4
personal expenses. On one occasion, Hamilton split an APRO check
into cash and three cashier’s checks at one bank. She deposited
two of the cashier’s checks into her own account at another bank
and used a portion of the funds to obtain a fourth cashier’s check
to purchase a new Ford Mustang convertible. The third cashier’s
check from the original bank was cashed at the Star Casino.
Beginning in May 1997, Palmetto, the Health Care
Financing Administration (“HCFA”) and the Texas Department of
Health systematically uncovered APRO’s extensive effort to defraud
Medicare. That October, Medicare acted to stem the flow of federal
funds to APRO by suspending its provider number. APRO filed a
federal lawsuit alleging racial bias on the part of HCFA and the
Texas Department of Health. The district court preliminarily
enjoined Medicare to reinstate APRO’s provider status pending the
litigation, but this court reversed the grant of relief. See
Affiliated Prof’l Home Health Care Agency v. Shalala, 164 F.3d 282
(5th Cir. 1998). In June 1998, federal agents executed a search
warrant at APRO’s premises and seized various business records.
The investigation and raid eventually led to the 32-count
indictment filed against the four defendants and the convictions
here at issue.
II. DISCUSSION
A. Money Laundering Promotion Convictions
5
Carrie Hamilton and Alice Miles were convicted on Counts
8-13 of the indictment, which charged them with aiding and abetting
money laundering promotion, a crime perpetrated by anyone who
. . . knowing that the property involved in a financial
transaction represents the proceeds of some form of
unlawful activity, conducts or attempts to conduct such
a financial transaction which in fact involves the
proceeds of specified unlawful activity . . . with the
intent to promote the carrying on of specified unlawful
activity.
18 U.S.C. § 1956(a)(1)(A)(I). This statute criminalizes all
financial transactions that involve funds or property that are
derived from specified illegal activity, where the transactions are
intentionally aimed at promoting specified unlawful activity. The
counts at issue here involved specific payments made by APRO for
office rent (Counts 8 and 12), payroll (Count 11), and payroll
taxes (Counts 9, 10 and 13). Both Hamilton and Alice Miles claim
that the evidence adduced at trial was insufficient to support
their convictions under this statute.
1. Standard of Review
In evaluating whether the evidence produced at trial is
sufficient to support a jury conviction, this court examines
whether a rational jury, viewing the evidence in the light most
favorable to the prosecution, could have found the essential
elements of the offense to be satisfied beyond a reasonable doubt.
See United States v. Rivera, 295 F.3d 461, 466 (5th Cir. 2002). In
reviewing the evidence presented at trial, we draw all reasonable
inferences in favor of the jury’s verdict. Id. We do not evaluate
6
whether the jury’s verdict was correct, but rather, whether the
jury’s decision was rational. Id.
2. Discussion
To sustain a conviction under the money laundering
promotion statute, the Government must show that the defendant:
(1) conducted or attempted to conduct a financial transaction,
(2) which the defendant then knew involved the proceeds of unlawful
activity, (3) with the intent to promote or further unlawful
activity. See United States v. Delgado, 256 F.3d 264, 275 (5th
Cir. 2001). Neither defendant argues on appeal that the financial
transactions underlying Counts 8-13 were not in fact conducted, or
that the funds used in these transactions were not, at least in
part, the proceeds of unlawful activity. Rather, both defendants
contend that as the funds were used to pay APRO’s “ordinary
business expenses,” the transactions do not demonstrate an intent
to promote or further the Medicare fraud taking place at APRO.
In examining the question of intent necessary for a money
laundering promotion conviction, this court has held that the
Government must present either direct proof of an intent to promote
such illegal activity or proof that a given type of transaction, on
its face, indicates an intent to promote such illegal activity.
See United States v. Brown, 186 F.3d 661, 670-71 (5th Cir. 1999).
Absent such proof, this court has held that a defendant may not be
convicted where the “proceeds of some relatively minor fraudulent
transactions” are used to pay the operating expenses of “an
7
otherwise legitimate business enterprise.” Id. at 671. In Brown,
this court reversed the money laundering promotion convictions of
a defendant who deposited fraudulently obtained funds in the
operating account of a generally legitimate car dealership and used
the funds to pay for a variety of legitimate business expenses.2
The Brown court noted that a number of cases in this circuit have
cautioned against allowing the “money laundering statute” to turn
into a “money spending statute.” See id. at 670 (internal
quotation marks and citations omitted). As a result, the court
held that strict adherence to the specific intent requirement
contained in the text of the money laundering promotion statute is
important to ensure that only “conduct that is really distinct from
the underlying specified unlawful activity” is punished under this
provision. See id. Brown emphasized that without such close
scrutiny on the question of intent, the money laundering promotion
statute would “simply provide overzealous prosecutors with a means
of imposing additional criminal liability any time a defendant
makes benign expenditures with funds derived from unlawful acts.”
2
The “above board” business expenses at issue in Brown were for:
(1) parts, paints, and materials; (2) the floor plan, cars that had
been traded in, floor plan interest, and a charge back; (3) software
support and office supplies; (4) conversions; (5) used cars;
(6) disposal of waste oil and used oil filters; (7) t-shirts, caps,
coffee mugs; (8) yearbook advertisements; (9) a computer system
lease; (10) advertising representation; (11) Graves's travel
expenses; (12) extended warranties on used automobiles; (13) glass
replacement; (14) automobile association membership fees;
(15) photocopier supplies; and (16) a health plan.
Brown, 186 F.3d at 668 n.13.
8
See id. Such a result would be inconsistent with the overall
statutory scheme created by Congress to address money laundering.
See id. at 670-71 (discussing, e.g., a separate money laundering
statute, 18 U.S.C. § 1957(a), which sets a $10,000 minimum on
prosecutions for the mere expenditure of unlawfully obtained
funds).
On the other end of the factual spectrum, however, are
cases where, “[w]hen a business as a whole is illegitimate, even
individual expenditures that are not intrinsically unlawful can
support a promotion money laundering charge.” See United States v.
Peterson, 244 F.3d 385, 392 (5th Cir. 2001). In Peterson, this
court upheld the money laundering promotion conviction of a
defendant who used fraudulently obtained funds to pay the general
operating expenses of a business whose only purpose was to engage
in fraudulent transactions. Id. at 391-92. The Peterson court
distinguished the real estate sales business in that case from the
car dealership in Brown because “all of the property owners who
paid fees to [the real estate company] were treated to . . .
fraudulent misrepresentations.” Id. at 391 (emphasis added).
Indeed, in Peterson, fewer than one percent of the clients received
any value for their fees. This court characterized the real estate
business in Peterson as “a sham and . . . [a] fraudulent tele-
marketing scheme.” See id. at 388-90 (quoting United States v.
Reissig, 186 F.3d 617, 619 (5th Cir. 1999)) (internal quotation
marks omitted).
9
The question at issue here is whether a rational jury
could find that APRO, as a whole, was an illegitimate business,
such that otherwise normal and legitimate payments for rent (Counts
8 and 12), payroll (Count 11), and payroll taxes (Counts 9, 10, and
13) might properly be understood as evincing Carrie Hamilton’s and
Alice Miles’s specific intent to promote money laundering. This
case falls somewhere between Brown and Peterson in terms of the
size and scope of the fraud in relation to APRO’s legitimate
business, but the particular payments for which the Government
indicted APRO were quintessentially normal business expenditures.
It appears from the trial record that APRO did not simply
exist to bilk the federal government out of money. APRO patients
actually received the home health care services that Medicare
contracted with APRO to provide. Even the Government’s indictment
avers that the money laundering activities did not begin until
August 1995, nearly two years after APRO was approved by Medicare.
Given that APRO was in business for four and a half years, from
December 1993 through June 1998, and that actual patients received
actual health care services, a rational jury could not find that
APRO was a wholly illegitimate enterprise along the lines of the
real estate scam in Peterson.
At the same time, however, it is important to note that
the scale and scope of the fraud taking place at APRO certainly
exceeded the “relatively minor fraudulent transactions” at issue in
Brown. See Brown, 244 F.3d at 391. Ninety-five percent of APRO’s
10
patients were Medicare beneficiaries, and an equivalent amount of
its revenue during its entire existence derived from the Medicare
program. The APRO defendants engaged in a wide range of activities
that fraudulently overcharged Medicare and netted them a
substantial amount of illicit revenue. The appellants were held
jointly and severally liable for restitution of over $4 million in
overcharges to Medicare.
While this substantial level of fraud provided a good
reason for the Government’s aggressive prosecution of the APRO
principals, it does not suffice to prove their specific intent to
promote the Medicare fraud by means of rent, payroll and payroll
tax expenditures. Appellants’ prosecution for these payments falls
far closer to the facts in Brown than to Peterson. In Brown, as in
this case, when a legitimate business pays customary, reasonable
and legal operating expenses, neither it nor its principals should
be subject to money laundering promotion for those payments. The
crime of money laundering promotion is aimed not at maintaining the
legitimate aspects of a business nor at proscribing all
expenditures of ill-gotten gains, but only at transactions which
funnel ill-gotten gains directly back into the criminal venture.
To hold otherwise would be to ignore Brown’s warning that the money
laundering statute is not a mere money spending statute.
This is not to suggest that the government can never hold
the principals of a legitimate business responsible for money
laundering promotion. The correct distinction, for purposes of
11
inferring specific intent, is between payments that further or
promote illegal money laundering with ill-gotten gains and payments
that represent customary costs of running a legal business. See,
e.g., Brown, 186 F.3d at 668 n.12 (noting that the government could
have selected transactions such as the deposit of illegally
obtained funds into a business account as the basis for a money
laundering promotion charge rather than indicting appellant for the
benign expenditures at issue there).
For these reasons, we REVERSE the convictions of Carrie
Hamilton and Alice Miles on Counts 8-13 for money laundering
promotion.
B. Medicare Kickback Convictions
Carrie Hamilton and Alice Miles were also convicted on
Counts 21-31 of the indictment, which charged them with paying
healthcare kickbacks in violation of 42 U.S.C. § 1302a-7b(b)(2)(A),
which provides that:
[W]hoever knowingly and willfully offers or pays any
remuneration (including any kickback, bribe or rebate)
directly or indirectly, overtly or covertly, in cash or
in kind to any person to induce such person . . . to
refer an individual to a person for the furnishing or
arranging for the furnishing of any item or service for
which payment may be made in whole or in part under a
Federal health care program.
This statute criminalizes the payment of any funds or benefits
designed to encourage an individual to refer another party to a
Medicare provider for services to be paid for by the Medicare
12
program. The appellants contend that the evidence was insufficient
to support their convictions on these charges.
The government’s case rested on evidence that APRO paid
Johnnie and Melvin Jones, the owners of Premier Public Relations
(“Premier”), to distribute information regarding APRO’s home health
services to doctors in the Houston area. The understanding between
APRO and Premier provided that Premier would deliver literature and
business cards to local medical offices. The Jones’s also
occasionally distributed plates of cookies to doctors’ offices.
When a physician determined that home health care services were
needed for a patient, the physician’s office might contact Johnnie
Jones, who would then furnish APRO with the patient’s name and
Medicare number for billing purposes. APRO paid Premier $300 for
each Medicare patient who became an APRO client as a result of
Premier’s efforts.
According to the Government, APRO’s payments to Premier
constituted improper kickbacks under the Medicare kickback statute.
In order to obtain a conviction under this statute, the Government
must show that a defendant: (1) knowingly and willfully made a
payment or offer of payment, (2) as an inducement to the payee,
(3) to refer an individual, (4) to another for the furnishing of an
item or service that could be paid for by a federal health care
program. See 18 U.S.C. § 1320a-7b(b)(2)(A) (2003). APRO’s
payments to Premier were based on the number of Medicare patients
that APRO secured from Premier’s activities. The only issue in
13
dispute is whether Premier’s activities constituted referrals
within the meaning of the statute.
The appellants assert that they cannot have violated this
statute because Premier never actually referred anyone to APRO, but
simply engaged in advertising activities on behalf of APRO. The
statute, they contend, was designed to ensure that a doctor’s
independent judgment regarding patient care is not compromised by
promises of payment from Medicare service providers. Premier did
not unduly influence the doctors’ decisions.3
Based on the evidence adduced at trial, we agree with the
appellants. In this case, Premier supplied promotional materials
to Houston-area doctors describing APRO’s home health care
services. After a doctor had decided to send a patient to APRO,
the doctor’s office contacted Premier, which then supplied the
necessary billing information to APRO and collected payment. There
was no evidence that Premier had any authority to act on behalf of
3
Appellants also argue that their conduct might have violated a
companion provision of the Medicare kickback statute which prohibits payments
that are intended to induce a party to “purchase, lease, order, or arrange for
or recommend purchasing, leasing or ordering any good, facility, service or item
for which payment may be made in whole or in part under a Federal health care
program.” 42 U.S.C. § 1320a-7b(b)(2)(B) (2003). Under this line of reasoning,
APRO’s payments to Premier might have been “recommendations” to doctors who then
“referred” patients to APRO. Thus, their payments to third parties such as
Premier may only be prosecuted under subsection (B), while payments directly to
primary care providers must be prosecuted under subsection (A). Compare United
States v. Polin, 194 F.3d 863, 865-67 (7th Cir. 1999) (subsections of the
Medicare kickback statute “do not distinguish between physicians and lay-
persons,” but rather “refer to the difference between the referral of individuals
(Subsection A) and the recommendation of specific services (Subsection
B)”).Regardless of any potential overlap in coverage by the two provisions,
however, we need not speculate on its extent in this opinion because APRO’s
activities did not run afoul of the Subsection A crime with which they were
charged.
14
a physician in selecting the particular home health care provider.
Indeed, at least one defense witness testified at trial that
Premier had no role in selecting the particular home health care
provider but that the decision was made by the doctor’s staff from
among ten agencies, including APRO. The payments from APRO to
Premier were not made to the relevant decisionmaker as an induce-
ment or kickback for sending patients to APRO.
There are, however, certain situations where payments to
non-doctors would fall within the scope of the statute. For
example, in Polin, a pacemaker monitoring service made payments to
a pacemaker sales representative based on the number of patients
that he signed up with the service. See id. at 864-65. The
salesman’s responsibilities included selling pacemakers, attending
implant procedures, and making sure that patients were monitored
following implantation. See id. In fulfilling this latter
responsibility, the salesman testified that when a physician
decided to use an outside service, the salesman would contact a
service provider and set up the monitoring for the patient. See
id. at 865. That is, the salesman would make the decision as to
which service provider to contact for the patient. The salesman in
Polin admitted that he could be overruled by a physician, but he
had never been overruled in the course of his fourteen-year career.
See id. Under our reading of the statute, because the salesman in
Polin was the relevant decisionmaker and his judgment was shown to
have been improperly influenced by the payments he received from
15
the monitoring service, the Seventh Circuit correctly upheld the
conviction of the individuals who paid the salesman in Polin.
Polin is simply different from this case.
Because APRO’s payments to Premier were not illegal
kickbacks under 18 U.S.C. § 1302a-7b(b)(2)(A), we reverse the
convictions of Carrie Hamilton and Alice Miles on Counts 21-31.
C. Financial Institution Fraud Enhancement
During sentencing, the district court applied a two-level
enhancement under 2001 Sentencing Guideline 2B1.1(b)(12)(A) to
Hamilton and Alice Miles. This enhancement provides that where a
defendant derives “more than $1,000,000 in gross receipts from one
or more financial institutions as a result of the offense, increase
by 2 levels.” See U.S.S.G. § 2B1.1(b)(12)(A) (2001). The district
court also applied a four-level enhancement to Richard Miles under
2000 Sentencing Guideline 2F1.1(b)(8)(B).4 All three defendants
contend that Medicare is not a financial institution within the
meaning of these guidelines.
The Government concedes that under a recent decision of
this court, Medicare is not a “financial institution” within the
meaning of the relevant guideline. See United States v. Soileau,
4
The district court improperly applied the four-level enhancement
under the 2000 Sentencing Guidelines to Richard Miles. As Richard Miles was
sentenced on December 20, 2001, the applicable guidelines were those promulgated
by the Sentencing Commission as of November 1, 2001. See 18 U.S.C.
§ 3553(a)(4)(A). As a result, if the enhancement were applicable, Richard Miles
should have been sentenced based on the same two-level enhancement that had been
applied to Alice Miles and Carrie Hamilton, who were sentenced three days
earlier. The court’s error is immaterial, however.
16
309 F.3d 877, 881 (5th Cir. 2002). While Soileau dealt with the
2000 Sentencing Guidelines, the relevant provision is in pertinent
part identical in the 2001 Guidelines. We vacate the sentences
containing this incorrect enhancement and remand for resentencing.
D. Sophisticated Money Laundering Scheme Enhancement
In sentencing Alice Miles and Carrie Hamilton, the
district court applied the sophisticated money laundering
enhancement under Guideline § 2S1.1(b)(3), which provides, inter
alia, that if an “offense involved sophisticated laundering” the
offense level may be increased by two levels. See U.S.S.G. §
2S1.1(b)(3) (2001). Both appellants challenge the application of
this enhancement.
We review the district court’s application of the
sentencing guidelines de novo and its findings of fact under the
clearly erroneous standard. See Davidson, 283 F.3d at 683. The
guideline is relatively new and this court has not yet examined its
application. However, this court has reviewed for clear error a
district court’s factual determination whether sophisticated means
were used in the commission of an offense under another sentencing
guideline. See United States v. Powell, 124 F.3d 655, 666 (5th
Cir. 1997) (examining 1995 Sentencing Guideline § 2T1.1); United
States v. Clements, 73 F.3d 1330, 1340 (5th Cir. 1996) (same).
Clear error should be the standard in this case, too, because
“layering” of transactions, which the court found to exist, is
17
defined as a form of sophisticated money laundering by the
guidelines commentary. See U.S.S.G. § 2S.1.1, cmt. n.5(A) (2001).
The appellants’ presentence reports utilize Hamilton’s
transaction involving the $45,000 check as one example of the basis
for the enhancement. As discussed above, this transaction took
place in a series of steps: (1) on April 8, 1997, APRO issued a
check made payable to Hamilton for $45,000; (2) two days later,
Hamilton took the APRO check and exchanged it for three cashier’s
checks and $6,000 in cash at Independence Bank; (3) that same day,
Hamilton then deposited two of these checks in her account at Texas
Commerce Bank and took a fourth cashier’s check out from Texas
Commerce Bank; (4) again, on the same day, this fourth check was
used to purchase a brand-new Ford Mustang convertible; (5) and in
her fourth transaction of the day, Hamilton cashed the third
cashier’s check (from Independence Bank) at the Star Casino.
The commentary to § 2S1.1 defines “sophisticated
laundering” in part as “complex or intricate conduct . . . [which]
typically involves the use of . . . (iii) two or more levels (i.e.,
layering) of transactions, transportation, transfers or
transmissions, involving criminally derived funds that were
intended to appear legitimate.” See U.S.S.G. § 2S1.1, cmt. n.5(A)
(2001). The commentary binds this court unless it is plainly
erroneous or inconsistent with the guidelines. U.S. v. Urias-
Escobar, 281 F.3d 165, 167 (5th Cir. 2002). It is true that
Hamilton was not very successful in obscuring the source or
18
destination of the illegally-obtained funds used in this series of
transactions. Nevertheless, the conduct Hamilton engaged in, even
though inept, is paradigmatic “layering,” a blatant attempt to hide
the flow of taxpayer money to her private use. When an individual
attempts to launder money through “two or more levels of
transactions,” the commentary clearly subjects an individual to the
sophisticated laundering enhancement.
Alice Miles argues that her sentence cannot be enhanced
under this provision because only Hamilton engaged in the
underlying conduct. However, as the Government notes, the jury
found Alice Miles guilty of participating in and aiding and
abetting a wide-ranging conspiracy with Hamilton to defraud the
federal government. One aspect of the scheme was to hide the
source of illegally derived funds. Hamilton’s particular
transaction constituted merely one incident in the jointly
undertaken activity, which was reasonably foreseeable to Alice.
Given the panoply of evidence concerning both defendants’ efforts
to illegally obtain and conceal these funds, Alice Miles’s sentence
was properly enhanced under this guideline.
E. Partial Jury Verdict Instruction
Appellant Richard Hamilton raises one conviction-related
issue that merits discussion. He contends that the district court
erred by not giving an Allen charge the first time the jury sent
a note to the judge. Because the court failed to give the Allen
charge on the first day of deliberations, Hamilton contends, a
19
second Allen charge, given after four days of deliberations, became
coercive in nature.
Ordinarily we review a district court’s decision to give
an Allen charge for an abuse of discretion. United States v.
Lindell, 881 F.2d 1313, 1320 (5th Cir. 1989) (standard of review
for an Allen charge is abuse of discretion). However, where a
defendant fails to object to the charge, the charge is reviewed for
plain error. Id.
Richard Miles neither requested an Allen charge when the
jury sent its first note out nor objected to the district court’s
response to the jury’s first note. At least one reason for Miles’s
failure to propose an Allen charge is that the jury’s first note
did not suggest that an Allen charge was necessary. The note read,
in part: “Your Honor, if we do not agree on a particular count
(ex: 8 guilty and 4 not guilty) does that become a not guilty
verdict on that particular count?” The district court, after
conferring with the lawyers for both sides, responded, “If you do
not agree on a particular court, that does not become a not guilty
verdict on that particular count. To return a verdict on any count
as to any defendant, whether your finding is guilty or not guilty,
you must be unanimous.”
Only when the fourth note from the jury arrived,
indicating they were still deadlocked, and the judge expressed his
intention to give an Allen charge, did Miles’s counsel vigorously
object that “the Allen charge is an invention of the devil and
20
should be consigned to hell.” Given Miles’s counsel’s strong views
on the impropriety of the Allen charge and his resultant objection
to the charge, it is quite odd for Miles to suggest on appeal that
the district court should have given the charge earlier, if at all.
In light of Miles’s failure to request an Allen charge in
the first instance, compared with his timely objection to the
eventual Allen charge, whether the appropriate standard of review
is plain error or abuse of discretion could be disputed. At the
end of the day, however, we find no abuse of discretion and no
error, plain or otherwise, in the district court’s decision to give
the Allen charge following the jury’s fourth note. There is no
basis for holding that the modified Allen charge given by the
district court had any improper coercive effect on the jury.
F. Other Issues Raised by the Defendants
After a thorough review of the briefs and pertinent
portions of the record, we find no merit in the various other
issues raised by the appellants.
III. CONCLUSION
For the reasons discussed above, we reverse the
convictions of Carrie Hamilton and Alice Miles on Counts 8-13
(money laundering promotion) and 21-31 (Medicare kickbacks). In
addition, we vacate the sentences of all three appellants and
remand for resentencing on the ground that Medicare is not a
“financial institution” within the meaning of U.S.S.G. §
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2B1.1(b)(12)(A), in addition to resentencing based on the reversal
of the convictions noted above. On all other grounds, we affirm
the rulings of the district court, the jury verdict, and the other
bases for the sentences imposed by the district court.
The judgment of the district court is AFFIRMED in part,
REVERSED in part, and VACATED and REMANDED for resentencing.
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